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An insurance company demanded appraisal six months after reaching an impasse with its insured over the amount payable for damage to the insured’s home – and four months after the insured had filed a bad faith lawsuit against the insurer. A federal district court in Texas recently decided whether the insurer had waived its right to demand appraisal under its insurance policy.
After the home owned by Rainey Rogers in McKinney, Texas, was damaged in a hail storm on March 26, 2017, he made a claim for the damage to his homeowners’ insurance carrier, Nationwide Property & Casualty Insurance Company.
Nationwide assigned the claim to adjuster Mitchell Dotson, who inspected the property and found a total of $9,175.35 in hail damage to Mr. Rogers’ property. Mr. Dotson found no damage to the home’s tile roof.
Mr. Rogers asked Nationwide to re-inspect his home, and Adam Hall ultimately found, among other things, hail damage to three tiles on Mr. Rogers’ roof. In light of Mr. Hall’s report, Mr. Dotson completed a new estimate of damage. The next day, Nationwide issued a letter to Mr. Rogers covering a portion of the claim but denying full replacement of the roof.
Mr. Rogers’ public adjuster prepared an estimate for repairs totaling $163,497.12 and a photo report showing evidence of hail damage to the roof.
Mr. Dotson again revised his estimate, but Nationwide maintained its denial of a full roof replacement.
On February 21, 2018, Mr. Rogers sued Nationwide for breach of the duty of good faith and fair dealing and violations of the Texas Deceptive Trade Practice Act and Texas Insurance Code.
On March 28, 2018, Nationwide removed the case to the U.S. District Court for the Eastern District of Texas.
Mr. Rogers filed an amended complaint on May 4, 2018, Nationwide answered on May 24, 2018, and the court entered a scheduling order on June 15, 2018.
On June 27, 2018, Nationwide invoked appraisal under the policy, selected an appraiser, and requested that Mr. Rogers designate an appraiser within 20 days.
On July 13, 2018, counsel for the parties conferred and Mr. Rogers advised Nationwide that he would not agree to proceed with appraisal.
On July 23, 2018, Nationwide filed a motion to compel appraisal under its policy and to abate the case pending the outcome of the appraisal.
For his part, Mr. Rogers contended that Nationwide had waived its right to demand appraisal because it had unreasonably delayed invoking appraisal for six months after the parties had reached an impasse and four months into active litigation, and that he had suffered prejudice as a result of that delay.
Nationwide asserted that it had requested appraisal at a reasonable time and further asserted that Mr. Rogers had not been prejudiced because the policy gave both sides the same opportunity to demand an appraisal. Moreover, Nationwide asserted that the policy contained a non-waiver clause that prevented an implied waiver of its right to invoke appraisal.
The Nationwide Policy
The Nationwide policy stated:
- APPRAISALIf you and we fail to agree on the amount of loss, either can demand that the amount be set by appraisal. If either makes a written demand for appraisal, each will select a competent, independent appraiser and notify the other of the appraiser’s identity within 20 days of receipt of the written demand. The two appraisers will then select a competent, impartial umpire. If the two appraisers cannot agree on an umpire within 15 days, you or we can ask a judge of a court of record in the state where the residence premises is located to select a competent, impartial umpire.
The appraisers will then set the amount of loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon will be the amount of the loss. If the appraisers fail to agree within a reasonable time, they will submit their differences to the umpire. Written agreement signed by any two of these three will set the amount of the loss. Each appraiser will be paid by the party selecting that appraiser. Other expenses of the appraisal and the compensation of the umpire will be paid equally by you and us. Any fees of expert witnesses or attorneys will be paid by the party who hires them. Neither the umpire nor the appraiser will have a financial interest that is conditioned on the outcome of the specific matter for which they are called to serve.
This is not a provision providing for or requiring arbitration. The appraisers and umpire are only authorized to determine the actual cash value, replacement cost, or cost to repair the property that is subject to the claim. They are not authorized to determine coverage, exclusions, conditions, forfeiture provisions, conditions precedent, or any other contractual issues that may exist between you and us. The appraisal award cannot be used by either you or us in any proceeding concerning coverage, exclusions, forfeiture provisions, conditions precedent, or other contractual issues. However, once contractual liability is admitted or determined, the appraisal award is binding upon you and us. This appraisal process and authority granted to the appraisers and the umpire can only be expanded or modified by written mutual consent signed by you and us.
The policy’s non-waiver clause stated:
- How your policy may be changed
. . .
- c) A waiver or change of a part of this policy must be in writing by us to be valid. Our request for an appraisal or examination does not waive our rights.
The policy also stated:
- Suit against us. No action can be brought against us unless there has been full compliance with the policy provisions. Any action must be started within two years and one day after the date of loss or damage.
The District Court’s Decision
The district court granted Nationwide’s motion.
In its decision, the district court explained that the parties had reached an impasse no later than December 21, 2017, when Nationwide declined a December 19, 2017 settlement offer from Mr. Rogers. The district court also pointed out that after Nationwide rejected Mr. Rogers’ offer, no settlement discussions took place, even after Mr. Rogers filed his lawsuit in February 2018, and that Nationwide had first requested an appraisal on June 27, 2018, about six months after the parties had reached an impasse.
The district court then stated that because the policy did not include a time frame in which a party had to request an appraisal, Nationwide needed to request appraisal “within a reasonable time from the moment of impasse.”
According to the district court, there was no authority to suggest that a six-month delay was per se unreasonable, absent other conduct that would result in waiver. The district court found no “intentional conduct inconsistent with [Nationwide’s] right to invoke the contractual right of appraisal.”
The district court observed that the policy contained a non-waiver clause, which, it said, was “binding and enforceable” – at least given the absence of evidence demonstrating that Nationwide had intentionally engaged in conduct inconsistent with claiming the right to enforce the non-waiver clause.
In any event, the district court ruled that even if Nationwide had waived the non-waiver clause and had waived its right to seek an appraisal based on delay, Mr. Rogers had not demonstrated that he had been prejudiced. In fact, the district court reasoned that it was “difficult to see how prejudice could ever be shown” when the policy gave both sides the same opportunity to demand appraisal.
Citing the policy’s “Suit against us” provision, the court concluded that the case should be abated until the completion of the appraisal process.
The case is Rogers v. Nationwide General Ins. Co., No. 4:18-CV-00213 (E.D. Tex. Aug. 13, 2018). Attorneys involved include: For Rainey Rogers, Plaintiff: Preston James Dugas , III, LEAD ATTORNEY, Preston Dugas Law Firm, PLLC, Fort Worth, TX. For Nationwide General Insurance Company, Defendant: Robert Glen Wall, Patrick Michael Kemp, Segal McCambridge Singer & Mahoney, Ltd. – Austin, Austin, TX.
Steven A. Meyerowitz, Esq., is the Director of FC&S Legal, the Editor-in-Chief of the Insurance Coverage Law Report, and the Founder and President of Meyerowitz Communications Inc. As FC&S Legal Director, Mr. Meyerowitz, a member of the team that conceptualized FC&S Legal, provides daily analysis and commentary on the most significant insurance coverage law decisions from courts across the country and news regarding legislative and regulatory developments. A graduate of Harvard Law School, Mr. Meyerowitz was an attorney at a prominent Wall Street law firm before founding Meyerowitz Communications Inc., a law firm marketing communications consulting company.